Forecasting
During week 4 we will be discussing how successful supply chain managers must be
strategists, able to synchronize every effort involved in the process: planning, sourcing,
producing and delivering a product or service. Develop a broad knowledge base in
logistics systems, global logistics, purchasing, information systems, project leadership,
finance and customer relationship management (Hazen & Lynch, 2008).

According to Investipedia (n. d.) the definition of ‘Forecasting’ is:

The use of historic data to determine the direction of future trends. Forecasting is
used by companies to determine how to allocate their budgets for an upcoming
period of time. This is typically based on demand for the goods and services it
offers, compared to the cost of producing them. Investors utilize forecasting to
determine if events affecting a company, such as sales expectations, will increase or
decrease the price of shares in that company. Forecasting also provides an
important benchmark for firms which have a long-term perspective of operations (n.
p.).

According to the article “Forecasting for Growth” (n. d.)

“to be effective as a leader of a transportation company, you must develop skills in
strategic thinking. Strategic thinking is a process whereby you learn how to make
your business vision a reality by developing your abilities in teamwork, problem
solving and critical thinking. It is also a tool to help you confront change, plan for
and make transitions, and envision new possibilities and opportunities” (n. p.).

As you develop a strategic vision for your business, there are five different criteria that
you should focus on. These five criteria will help you define your ideal outcome. In
addition, they will help you set up and develop the steps necessary to make your
business vision come true. In the modern supply chain, forecasting is necessary for
companies that manufacture items for inventory and that are not made to order.
Manufacturers will use material forecasting to ensure that they produce the level of
material that satisfies their customers without producing an overcapacity situation where
too much inventory is produced and remains on the shelf. Equally, the forecast must not
fall short and the manufacturer finds them without inventory to fulfill customer’s orders.
The cost of failing to maintain an accurate forecast can be financially catastrophic (Hazen
& Lynch, 2008).

Forecasts are developed for a company’s finished goods, components and service parts.
The forecast is used by the production team to develop production or purchase order
triggers, quantities and safety stock levels. The forecast is not static and should be
reviewed by management on a regular basis. This is to ensure that information on future
trends, the internal or external environment is incorporated into the forecast to give a
more accurate calculation (Hazen & Lynch, 2008).

In order for forecasting within your company to be effective the driving forces have to be
identified. When identifying these forces you are able to make your ideal outcome
happen. First you have to develop your company’s vision and mission, so you know what
you stand for. “Driving forces usually lay the foundation for what you want people to

focus on in your business (such as what you will use to motivate others to perform).
Examples of driving forces might include: individual and organizational incentives;
empowerment and alignment; qualitative factors such as a defined vision, values and
goals; productive factors like a mission or function; quantitative factors such as results or
experience; and others such as commitment, coherent action, effectiveness, productivity
and value” (“Forecasting for Growth”, n. d., n. p.).

Transportation economic evaluation quantifies and monetizes transport project’s benefits
and costs. It can significantly influence planning decisions. This report critically examines
conventional transport economic evaluation. It integrates two different but overlapping
perspectives: planners interested in comprehensive and multi-modal transport system
analysis and economists interested in economic efficiency and economic development
impacts. This analysis indicates that conventional transport economic evaluation fails to
reflect basic economic principles including comprehensive and neutral analysis, economic
efficiency, and consumer sovereignty and integrated decision-making. It evaluates
transport system performance based primarily on vehicle travel speeds and operating
costs, and overlooks other accessibility factors such as the quality of other modes,
transport network connectivity and geographic accessibility. It overlooks many significant
impacts including parking costs, vehicle ownership costs, and mobility for non-drivers,
public fitness and health, and the incremental costs of induced vehicle travel. These
omissions and biases tend to favor mobility over accessibility and automobile travel over
other modes. Theoretical and empirical evidence indicate that these distortions often
reduce economic productivity. More comprehensive and multi-modal evaluation can
provide better guidance for transport planning and economic development (Hazen &
Lynch, 2008).

Video – Chapter 7: Demand forecasting in a Supply Chain – The role of forecasting